When the stock market entered bear territory last month, individual investors weren't the only ones taking note. The continued softening of the market can also have a major effect on nonprofit organizations, many of which have benefited greatly from an exceptional run during the past five years.
While it's still too early to tell how the recent changes will affect Jewish nonprofits in Los Angeles, fundraisers at some of the city's largest philanthropic organizations say they're not worried yet.
The Jewish Federation's annual United Jewish Fund campaign is "off to its best start in seven years," according to William S. Bernstein, Federation's executive vice president for financial resource development. He said giving has already increased 15 percent, and the campaign reached the $26-million mark -- more then half its goal -- a month and a half earlier than it did last year.
Not suffering either is the American Jewish Committee (AJC). "We are right on schedule," said Rabbi Gary Greenebaum, Western regional director of the AJC. The organization is "raising about the same as last year, which was our best year ever -- over $2 million in Los Angeles," he said.
Likewise, MAZON: A Jewish Response to Hunger is having a "banner year," with 100 new synagogues having joined its Passover campaign, said H. Eric Schockman, MAZON's new executive director. Organizations that emphasize planned giving -- like the American Society for Technion--Israel Institute of Technology and the Jewish Community Foundation of Los Angeles -- say they are also performing strongly this year.
One factor making these Jewish organizations hopeful is that the last several years weren't just good, they were very good. During the three years from the start of 1997 to the end of 1999, the nation's largest charities experienced double-digit percentage increases in giving, according to a September 2000 report in The Chronicle of Philanthropy.
"There's been huge growth in private foundations that give to Jewish causes," said Evan Mendelson, executive director of the Jewish Funders Network, an organization that brings together Jewish donors across the country to collaborate on their giving. In 1998, she said, there were 3,000 U.S. private foundations that gave to Jewish causes, and today there are 5,000, and that doesn't even count the supporting foundations and donor-advised funds that are run by individual Federations and community foundations. The accumulated assets of these funds topped $6.2 billion in 1998, although the percentage given to Jewish organizations varies.
"There is a tremendous amount of new money that's secured into foundations," said the AJC's Greenebaum. "They may not be making the same interest rate that they were ... but those foundations will be giving in perpetuity."
A February survey in The Chronicle of Philanthropy, however, found that nearly half the country's largest foundations expected giving to remain flat in 2001. Slightly more said their assets shrank over the last year. In Los Angeles, it's too early to predict what will happen to the local foundations, the stock market and the economy overall, said Marvin I. Schotland, president and CEO of the Los Angeles Jewish Community Foundation, a $325-million endowment that helps Jewish donors with tax and estate planning and philanthropic giving. What he and other leaders say is that during times of financial uncertainty, people give more strategically; they think about which organizations are best equipped to fulfill the passions they believe in.
"Passions and commitments don't come and go based on economic circumstances," Schotland said. "They're based on what you feel deep down in your heart or your gut. Economic circumstances merely allow you to fulfill those commitments."
Schockman agrees that donors are more selective when the economy sags. But he points to the tradition of tzedakah and says that, when it comes to giving, "Jews behave differently.... If the economy bottoms out, Jews will still give. I think they will give to organizations they feel comfortable with, who have good track records, whose administrative overheads are within guidelines of nonprofit management and who they trust." Most leaders agree that a nonprofit's best protection against an economic downturn is planning, a clearly defined mission and a good track record. A large endowment doesn't hurt, either.
"The next couple of years are going to be challenging for charitable organizations," Schotland said. "The better-run organizations and those whose missions resonate will come through the process more easily and with less trauma than those that are not."
"It's a little like the pharaoh's dream -- there are the fat cows and the skinny cows. Part of fundraising is to do as well as you can in good years and as well as you can in the not-so-good years," said Greenebaum of the AJC. "I think people are not convinced that the economy is, long-term, so unhealthy that it has completely altered how people are giving right now. Many, many, many people are vastly better off than they were 10 years ago, so they may still be giving at a higher rate."
The Federation's Bernstein agrees. "Although the economy and market have declined somewhat in the last year, the accumulated wealth of the community ... still leaves contributors with significant flexibility in terms of how they wish to spend their charitable dollars," he said.
While a large amount of money has been created, it would be a mistake to believe that everyone has benefited. "There's 31 million people who go to bed hungry every day, and 12 million of them are children," said Schockman. "Stock market or no stock market, there's an epidemic out there of hungry people. We have not seen a diminution, even in the good times."
While tzedakah inspires giving, so do tax deductions. One tax of concern to fundraisers is the estate tax, sometimes called the death tax, which enables people to reduce the taxable value of their assets when they die by leaving a portion of it to charities. The tax encouraged the creation of many major foundations, such as Hughes, Mellon, Ford, and MacArthur.
If the Bush administration eliminates the estate tax, nonprofits stand to lose a large incentive for giving. Like the economy, the future of the estate tax remains an unknown. But a cause that speaks to donors' hearts and checkbooks is the best protection against the hazards of both.
"The longer you've been involved with a cause, then the stronger you feel about it," said Diane Siegel, executive director, Western region, of the American Society for Technion. "It becomes part of your life and something you want to do, regardless of tax benefits."